by Ivan Martchev
June 2, 2026
Perhaps the best explanation for this historic rip higher was simply great earnings. According to FactSet, which tracks those numbers closely, “For Q1 2026 (with 97% of S&P 500 companies reporting actual results), 85% of S&P 500 companies have reported a positive EPS surprise and 81% of S&P 500 companies have reported a positive revenue surprise. For Q1 2026, the blended (year-over-year) earnings growth rate for the S&P 500 is 28.6%. If 28.6% is the actual growth rate for the quarter, it will mark the highest earnings growth rate reported by the index since Q4 2021 (32.0%).”
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Most people I talked with recently feared that the Iran war would derail the U.S. economy. In the last month of the first quarter (March), oil prices and interest rates were spiking. While there is a delay before that hits the economy, I thought we would be lucky with 14%-16% EPS growth. Instead, we got 28.6%!
I must add this gain is dominated by the tech sector. Very high EPS growth in the “Mag 7” pulls the average dramatically higher, as Mag 7 gains were over 60% while the other 493 S&P companies gained about 17%. Because of Mag-7 multi-trillion-dollar market caps, average gains skew dramatically higher.
Still, earnings are growing across the board, and the market typically goes up in an accelerating earnings growth environment. If we keep accelerating to the upside like this on EPS growth, I am beginning to think my target of 8,000 on the S&P 500 – made at the beginning of the year – may be conservative.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Although EPS is at a record high, earnings multiples aren’t. Stocks are not cheap at 21.2 forward P/E multiples, but that, too, is skewed. If it were not for the Mag 7, the S&P 500 median P/E would be closer to 17. All these numbers do not suggest that it is straight up from here, but they surely suggest more gains.
Still, it remains to be seen what happens when the SpaceX IPO takes $75-billion out of the rest of the market (a number that can go up to $100-billion if there is more investor interest). Will they raise the cash before the June 12 IPO date? There are more trillion-dollar IPOs coming later in the year, but they may very well come in late 2026, when the stock market is expected to be seasonally strong.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
I never did believe in the “Sell in May and go away” theory. Historical 100-year returns are fine for defining trends, but the market can – and often will – sharply deviate from them in any given year.
In 2025, the trade war sharply skewed the averages. This year, it was the Iran war. It remains to be seen how close we track to the long-term average, but it is possible we’ll rally throughout the summer because the market was subdued in the first quarter due to the war – when markets should be seasonally strong.
We also have a new Fed Chairman, who can cause quite the volatility if he proceeds with his stated goal to shrink the Fed balance sheet and cut the Fed funds rate more dramatically. There are no signs this will happen anytime soon, and he needs the FOMC to vote on his dramatic ideas, which they may not do. It would be a warning sign if the FOMC votes against the Fed Chairman, which happened to Paul Volcker.
This is the historical record, per Google’s Gemini:
The “rebellion” against Federal Reserve Chairman Paul Volcker did not actually take place during a meeting of the Federal Open Market Committee (FOMC). Instead, it occurred during a meeting of the Federal Reserve Board of Governors on February 24, 1986.
Here is how the event—frequently dubbed a “coup” by the press—unfolded:
The “Gang of Four” Vote
By early 1986, President Ronald Reagan had appointed several new members to the Board of Governors who favored pro-growth policies and were eager to lower interest rates. Four of these Reagan appointees—Vice Chairman Preston Martin, Martha Seger, Wayne Angell, and Manuel Johnson (dubbed the Gang of Four)—outvoted Volcker 4 to 3 to slash the discount rate from 7.5% to 7%.
Volcker strongly opposed the immediate cut. He wasn’t entirely against lowering rates, but he wanted to delay the move until he could coordinate with the central banks of West Germany and Japan. He feared that if the U.S. cut interest rates unilaterally, foreign investors would pull their capital out, triggering a dangerous, uncontrolled collapse of the U.S. dollar.
The Compromise and Resolution
Being outvoted on a major policy decision was an unprecedented blow to a Fed Chairman’s authority, and rumors quickly spread through the central bank that Volcker was on the verge of resigning. Recognizing the potential chaos that a Volcker resignation would trigger in global financial markets, Governor Wayne Angell went to Volcker’s office later that afternoon to broker a compromise. By the end of the day, the Board reconvened and agreed to suspend the rate cut to give Volcker the time he requested to negotiate with foreign officials.
The strategy paid off. Less than two-weeks later, after West Germany and Japan agreed to reduce their own interest rates, the Board met again and unanimously voted to lower the discount rate to 7%, matching Volcker’s coordinated approach and restoring his command over monetary policy.
I would not be surprised if the new Fed Chair runs into some of his own rebellion issues later in 2026
All content above represents the opinion of Ivan Martchev of Navellier & Associates, Inc.
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Ivan Martchev
INVESTMENT STRATEGIST
Ivan Martchev is an investment strategist with Navellier. Previously, Ivan served as editorial director at InvestorPlace Media. Ivan was editor of Louis Rukeyser’s Mutual Funds and associate editor of Personal Finance. Ivan is also co-author of The Silk Road to Riches (Financial Times Press). The book provided analysis of geopolitical issues and investment strategy in natural resources and emerging markets with an emphasis on Asia. The book also correctly predicted the collapse in the U.S. real estate market, the rise of precious metals, and the resulting increased investor interest in emerging markets. Ivan’s commentaries have been published by MSNBC, The Motley Fool, MarketWatch, and others. All content of “Global Mail” represents the opinion of Ivan Martchev
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